National Income vs. Per Capita Income

Attribute	National Income	Per Capita Income
Definition	Total income earned by a country's residents and businesses	Average income earned per person in a country
Calculation	Sum of all incomes earned within a country's borders	Total national income divided by total population
Measurement	Usually measured in terms of Gross National Income (GNI) or Gross Domestic Product (GDP)	Usually measured in terms of Gross National Income (GNI) or Gross Domestic Product (GDP) per capita
Indicator of	Economic health and size of a country's economy	Standard of living and income distribution within a country

Definition

National income and per capita income are two important economic indicators that provide insights into the overall economic health of a country. National income refers to the total value of goods and services produced within a country's borders in a given period, usually a year. On the other hand, per capita income is the average income earned per person in a country, calculated by dividing the total national income by the population.

Measurement

National income is typically measured using methods such as the income approach, expenditure approach, and production approach. These methods take into account factors such as wages, profits, rents, and taxes to calculate the total value of goods and services produced. Per capita income, on the other hand, is calculated by dividing the total national income by the population of the country. This provides a more accurate representation of the average income earned by individuals in the country.

Importance

National income is an important indicator of a country's economic performance and growth. It helps policymakers and economists understand the overall level of economic activity within a country and can be used to compare the economic performance of different countries. Per capita income, on the other hand, provides insights into the standard of living and income distribution within a country. It helps to understand how income is distributed among the population and whether there are disparities in income levels.

Factors Affecting National Income

Several factors can affect a country's national income, including economic policies, technological advancements, population growth, and external factors such as global economic conditions. Economic policies such as taxation, government spending, and trade policies can have a significant impact on national income. Technological advancements can lead to increased productivity and efficiency, which can boost national income. Population growth can also affect national income, as a larger population may lead to increased production and consumption. External factors such as global economic conditions and trade agreements can also influence a country's national income.

Factors Affecting Per Capita Income

Per capita income is influenced by factors such as income distribution, population growth, inflation, and economic development. Income distribution plays a crucial role in determining per capita income, as disparities in income levels can lead to a wide gap between the average income and the income of the wealthiest individuals. Population growth can also impact per capita income, as a rapidly growing population may lead to a decrease in average income. Inflation can erode the purchasing power of individuals, affecting per capita income. Economic development, including investments in education, healthcare, and infrastructure, can help increase per capita income by improving productivity and creating more opportunities for income generation.

Comparison

While national income provides a broad overview of a country's economic performance, per capita income offers a more detailed perspective on the standard of living and income distribution within the country. National income can be influenced by factors such as economic policies, technological advancements, and external conditions, while per capita income is more directly affected by income distribution, population growth, inflation, and economic development. Both indicators are important for understanding the overall economic health of a country and can be used to make informed decisions about economic policies and development strategies.